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Tuesday, December 27, 2011

SPX and XLE Update: Light Volume Breakout is Highly Suspect

There's been no material change in the counts since yesterday.  The expectation remains that a top will form sometime over the next week or two.  Bear market bottoms tend to be V-shaped, but bear market tops are affairs that generally last several sessions as a balance is reached between buyers and sellers.  They sometimes take the form of a drop followed by a retest of the high, but very rarely form as immediate reversals. 

The volume on Tuesday was even lower than Friday, which creates a bit of a problem for bulls.  The SPX has made a technical breakout above a significant trendline and its 200 dma, but true technical breakouts are supposed to occur on increasing volume, not diminishing volume.  This bearish volume divergence adds corroborating evidence to my preferred Elliott Wave count which suggests the breakout is merely a head-fake.

On Tuesday, the market reached the target zone for the current count.  Despite this, while an immediate reversal is always possible, probabilities argue for fresh highs for the move -- and the corresponding, more typical, price action which usually forms a top.  The implication of the short-term counts is that the market is due a bit of sideways/down action before moving back up to make another new high. 

Along those lines, the first chart I'd like to share is the one-minute SPX chart (below).  This chart shows a potential trendchannel projected from two different lows, and the knockout level for the bulls.


The next chart is a daily chart of the SPX, and shows several resistance and support lines which are in the vicinity of current prices.  It also notes the low volume of the breakout.


On the chart above, I have also shown my expectations for the market when Minor Wave (2) finally completes.   Apparently some readers were confused on this point:  I'm not expecting a huge drop immediately.  I have on occasion referred to the next wave (Minor Wave (3)) as "the crash wave," which is probably what created the confusion -- but I have never expected an immediate crash off the Minor (2) top.  I would expect the next move to start as a persistent march lower, possibly in the form of a waterfall (my first target is SPX 1000-1050), then a decent bounce, then the crash.  This entire process would unfold over the span of several months.  All of this, of course, is predicated on the idea that the market is indeed forming the Minor (2) top.

The next chart is presented in support of that theory.  Some bears are beginning to undergo an identity crisis, given the persistent hovering of the market, and the recent technical breakout.  The chart I'd like to highlight is the SPDR Energy Sector ETF (XLE), which consists of holdings such as Exxon, Chevron, ConocoPhillips, and similar companies.  One reason I like to track this index is that it's often used as an inflation hedge and thus could give leading indications if the market had impending inflation expectations.  Since money printing is one of the fears bears are expressing, this seems an ideal time to share this chart.

On the chart below, what strikes me as important is the fact that the October rally is virtually impossible to count as an impulse wave.  Due to the numerous cases of overlap, it can only be counted as a corrective structure... and this implies that the October lows will be revisited and eventually broken.  This chart is a particularly good example of a triple-zigzag, because it conveys not one, but three meaningful Fibonacci relationships in each wave a and c pair of the triple-zigzag off the October lows.  These are highlighted in the callout boxes.

It also bears mention that this ETF is currently lagging the Dow and SPX in performance, as it has not yet bested its December highs.  This isn't what I'd expect to see if there was a lot of money flowing through the inflation pipes.

Although the recent structure is a bit less clear-cut than October, the expectation is that the XLE either topped in early December, or is very close to doing so.




In conclusion, I'm still a bear.  I'm not a permabear, though, and if the market gives me some reason to change my stance, you'll be the first to know about it.  But so far, it's given me no reason to do so.  The bullishness which is now in the air is to be expected if the market is topping -- in fact, it's a prerequisite that traders are bullish near tops.  Usually, the market gets the majority to flip at just the wrong time.  Trade safe.

The original article, and many more, can be found at http://PretzelCharts.blogspot.com

175 comments:

  1. "Good Morning!"

    http://www.rosswalker.co.uk/movie_sounds/sounds_files_20100522_76672091/kindergarten_cop/good_morning.wav

    "I'm a cop, you idiot!"

    http://www.rosswalker.co.uk/movie_sounds/sounds_files_20100522_76672091/kindergarten_cop/cop.wav

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  2. The link for the "good morning" didn't work.  So you have to use your imagination to say it like Ahhnold.

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  3. Whoops, had to make a quick labeling adjustment.  Fixed.

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  4. fwiw:  astro comments.  Reminder of the Sun conjunct Pluto overnight which should literally bring to light debt issues - with the Italian bond auction over these two days, it should be interesting.
    Since the upcoming Uranus square Pluto events begin in June, astrologers watch for other planetary contacts/triggers with these planets in advance of the exact squares.  The idea is that they will give you a sort of "preview" of how the energy may play out in the future. 

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  5. Hey pretz. Yesterday you said that you expected yesterday's lod to be taken out today. Do you still think that?

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  6. PL, what's going on with the Euro? Is there a H&S formation on the 5 year USDEUR chart?

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  7. Yesterday's sideways up move looked corrective -- so best guess is yes.

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  8. EUR/USD has a head and shoulders going back to summer 2010.

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  9. Unless that was ALL OF wave 4.  Which I suppose is possible, and would indicate the market's in a hurry to get the rally up a bit more... and finished sooner.

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  10. wave 2 before the "3 of 3" should make most/all bears feel like turning bullish - feels like we are getting there

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  11. Another question for ya Pretz. A couple days ago you posted a chart that showed a potential head fake that would sucker in the most buyers, where the market would theoretically break out of the triangle to the upside, then hit a resistance level and subsequently drop. How does that chart correspond to the S&P levels, and is that more likely now with this light volume bullishness?

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  12. That chart was of the NYA, and it has broken out of the triangle.  If it reaches the next resistance line, it would correspond to roughly 1290 SPX. 

    And yes, as stated, all breakouts are very suspect with this weak volume.

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  13. Yep.  A good 2nd wave is supposed to get everyone on board the wrong side.  :)

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  14. http://2.bp.blogspot.com/-j1pPz1TPCTs/TvMQcUjfEcI/AAAAAAAACls/ZKXKRiHCXvA/s1600/13-7.jpg

    Here's a chart of the longer-term H&S, PL how do you feel about this target? It would put the DX somewhere around 96 I believe.

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  15. As I stated in the article yesterday, assuming the count is correct for Euro, the target is 1.10-1.15, potentially lower.

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  16. Woops, that's right, my apologies PL. Brain fart into the new year...

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  17. No worries.  New Year's resolution!  :)

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  18. Morning PL. 

    How much weight do you give  the SP futures tagging 1255 last night?  That corresponds to the short-term wave 4 bottom.  I'm thinking we need to confirm that bottom in the cash market..?

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  19. orning/Nite guys.  Back from my trip, so I can join you guys in the paint drying sightseeing tour.  Thought I share this article about S&P going to 567 :)  Quite similar to Pretzel's alternate count

    http://blogs.wsj.com/marketbeat/2011/12/27/sp-500-falling-below-600-this-will-even-make-the-bears-shutter/?mod=WSJBlog

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  20. hrm I see. Thanks pretz

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  21. Good morning PL. Glad I didn't buy shorts at the close. The big gap down ain't here yet.

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  22. Yepper - I'm so confused right now I may take a few days off 

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  23. PL,

    Interesting read, confusing market and anemic volume doesn't help.  Hope you had a great Christmas and wish you a healthy and prosperous new year. 

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  24. Guess PL must have fallen asleep :)

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  25. Waking up late.  Looks like that top is in.  And sellers own the action right now.  And I missed quite the waterfall open.

    Next few sessions should be a lot easier to trade than the last few.  

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  26. morning guys, what are you making out of the action so far? top is in? 

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  27. break back through 200 sma -- important- but needs to hold. couple of levels to watch - PL's KO level of the bullish count at 1242 and 1248-1250 -- this is where a backtest of the downtrend line from Oct 27th will occur -- may bounce off that level if bullish count is still on. imo

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  28. meant to add that the Euro getting kicked in the nuts isn't helping either

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  29. concur....I'll be doing some covering in the mid 1240s

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  30. I think only a headline event gets us back above 1,260 at this point.  This market has no direction to go but down.  

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  31. covering here at 1254ish, will reshort from rebound...

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  32. Wow, I just looked.  Below 130.  That's getting kicked HARD in the balls.  Looks like all assets will have a long ways to fall from here.

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  33. ps- trailing stop, so if the waterfall continues im along for the ride...

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  34. Doesn't this wave down look impulsive?  ...which would rule out the wave IV idea

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  35. Could be the c of 4 completing here with wave 5 starting up from the SPX low of 1253.71

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  36. Would you chase it at this point, or wait for some retrace?

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  37. props to pretz for calling the channel here, do we rebound or break? tis the question.

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  38. makes sense but we're at 1252 now

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  39. Yep, turn didn't follow through there. Still have a ways to go to hit the lower channel and KO line.  Will be interesting to see if we do get the turn and get the 1290 ish level later this week.

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  40. Missed the down open, but decided to chase. Working out so far. Reasoning was that it already broke down PL's guidance on expected range today 1260 - 1270. So, at 1254, decided it was a pause and not to expect rebound. Going for momentum here. Hoping for a downside breach of PL's bull KO at 1242.

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  41. well the santa rally lasted for 1 day...  I think the bulls will defend the 1250 heavily as we all know next stop is 1241-ish... bears' job done for to day, just need to defend 1255 and if that breaks 1260-ish 

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  42. Santa clauss is back to the North pole...game over...Euro Horror added with China and Japan is coming to a theater near you..NOW...
    No way to get long these equity markets..
    eur/usd is trading below major support @ 1,2950
    it seems all of this has been told in advance by technical...false break on low volume, rising wedge etc...
    cheers

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  43. It looks like a nice thrust downward so far after the triangle.

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  44. In my opinion, there is no newsworthy reason for this decline.  It is all based on market forces and as PL stated, an expected pause, which seems to be turning into more of a waterfall decline, at least for now.  For the market to drop this much based on the "possibility" of a less than desireable auction of the long term Italian bonds is ludicrous, and just another example about how any "news" can be spun anyway to fit the proper impending market moves.

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  45. Agreed.  Bears have accomplished what they needed to today.  I expect range trading for the remainder of the session.  They don't need to break 1,250 today. 

    If they do, that's nice and all but why waste more resources getting to 1,240 than necessary?  The Street can spend the day clearing out all buyers at this level.  This is still extremely overpriced territory for stock valuations.Wish I would have been up for the open, though I usually am tentative about trading the first half hour.  Today's would have been a pretty easy decision to jump on though.Will be curious about how the 'big' Italian debt auction turns out tomorrow.  Today was the easy one, and it didn't do much to please the markets anyway.

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  46. Newspaper says the Italian auction "went well" - so now, risk off? Maybe the bulls have an identity crisis also :-)

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  47. DR -  look at from this perspective: a sell of on good news is really good for the bear case!!!

    I'd expect a retest of around 200dma by tomorrow or so and then lower we go. 

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  48. it would seem like the euro is taking its cue from news of the rapidly expanding ecb's balance sheet.

    isn't this precisely the action that so many from the talking head brigade have opined for? 

    seems like just the sort of "catalyst" necessary to enable pretzels call for new highs over the next week.  

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  49. LOL , i stayed in bed too. But, man would have been a nice ride from yesterday's 1269 top down to the 1250 area we are now in. Easy 20 points! Either way, this rally is pretty much over.

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  50. Arnie:  what is your reason for thinking we retest the 200 dma tomorrow?  I don't pretend to have a read on the matter.  Just curious about your thinking here.

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  51. since it's major support/resistance. that's all. May as well never happen. The 200 dma is currently at 1258, which is around the 1255-1262 area that are also critical, so I figured 1+1 and that the 200 dma would be nicely in between.

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  52. 1pm, bull time

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  53. wouldn't be surprised if we rallied to close flat again, like yesterday.  low volume moves are untrustworthy in both directs, imho

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  54. A few notes while watching the bounce along 1,250.

    Looking at the waterfall decline from the morning.  Notice the bounces from 1,258 to 1,260.  Then again from 1,254 to 1,256.  

    This is very controlled downward movement.  Drop eight points, retrace two.  Drop six points, retrace two.  Drop six more points.  Retrace two and several more two point bounces at the final bottom.

    As of this writing the market has fallen at total of sixteen points from the open.  It has ALSO retraced nine.  This math is IMPORTANT.  
    I understand the EW explanation for the retrace moves. But my own theory is that there is an additional reason.  

    I don't think the bots and longs stopped the decline at the various levels they chose because they thought they'd hold things there.  They NEED the retrace moves in order to get back to even.  And then once the retrace is over, things can continue falling from there.So if you were on the wrong side of the move, then those bounces would have gotten you back to even (or even positive) IF you added significantly to your position on the way down and especially at the wave bottom just before the retrace.  So if you are six points down, but you are expecting a two point retrace to happen very, very soon (which means you'll be only four points down by the time the retrace is concluded) then making your position three times it's original size gets you above water IF you triple your position at the wave bottom.  I strongly suspect that the math for this is programmed into the trading bots.   And that their 'expectation' is that even if they are on the wrong side of the measured move, they can add to their position at the bottom, sell on the bounce and it'll all add up to a wash or they'll even some out ahead.  But the bounces HAVE to happen in order for it to work.  If they don't then too many participants get wiped out.  They would just keep adding to their position on the way down and never have the selling opportunity on the bounce.I think this is why the VAST majority individual sub-waves are not longer than eight points.  Longer than that without at least a two point bounce in the other direction is simply very uncommon.And the ones that are longer than eight points tend to have very large snapback moves (four to five points) or a series of snapbacks at their conclusion that cumulatively add up to at least half of the total move.  

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  55. Just covered my short for insignificant gain. My thinking is that the KO at 1242 didn't happen, and (a) it's now at the bottom of the up channel, (b) wave 4 looks to be over (getting close to the top of 1.

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  56. interesting theory; makes a lot of sense, especially if the bots are controlling $Bs...

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  57. i expect a new low today, but I SERIOUSLY doubt we breach 1242. That would be too kind to the bulls IMO.

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  58. too kind to the bears...typo :p

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  59. It has been a wild, exhilarating, day counting, and riding, the intraday E Waves! :)

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  60. AF,

    What is your opinion on the current intraday count?

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  61. I believe we are now on the "c" and may be heading down again to a new "1". I just bailed out after riding the sucker down and then rode it up again. It was exciting. :)

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  62. If you think of this as buy the rumour, sell the news - from the bears' perspective - there should be a spike up tomorrow morning.

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  63. I won't be holding overnight tonight. Rather hard to tell what might happen from here.

    One perspective is that tomorrow looks like it's kinda begging to turn today into a bear trap.  Especially if hopeful headlines get printed.  

    The other possibility is that the market movers see that the easiest way to make money right now is moving the market down and not up.  Which is what I think today's trading was all about.  Moving off of 1,265 was going to be expensive and with no buyers. There is a reason it only happened on light volume and when little resistance would be encountered. 

    But moving down from 1,265 was easy and there are both a lot more buyers and sellers in this range.  So down we went.

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  64. Depending on the result of Italy's 10y bond sale. People are freaking out that every single Euro seemed to went to shorter duration Italian IOU's this morning. And the people are paying to buy short duration German Bunds. :)

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  65. A bear trap is what this looks like.  It was almost too quick and easy.  With the ECB having givien so much money to the banks, the Italian auction is likely to be a pre-planned success, and headlines will reflect that.  Also, Chicago PMI comes out tomorrow, and ISM numbers early next week.  US ISM numbers are likely to be good.  The wild card is EU and China ISM numbers (not so good).  What will the market do?  My best guess: rally on Thursday and Friday, then hover next week with all the New Year money coming in, and finally head down as earnings get underway.

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  66. Out of 17 Euro countries, 10 will have -ve GDP growth. Yikes.
    It is a miracle that SPX seems so fearless and is doing so well. :)

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  67. Have you noticed the 10 yr US bonds screaming up in price. Does the bond market know something of importance coming soon?

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  68. Season's greetings everyone.  I've been away on vacation for a while, just catching up on the news.   Seems like SPX has suspended itself from reality with rotation into defensive sectors.  Stocks I follow that are up pretty big in recent weeks include MO - domestic smokers, KMP - oil pipeline LP whose revenues are independent of price of crude, and VZ - big exposure to domestic wireless.  Even after the run-ups, all still sport div yields around or over 5%.  In any event, I expect breadth will get narrower and narrower into these domestic focused names if this market continues to rally.  In contrast it looks like NDX has not violated the KO level of the old preferred count and PM's and Euro look like $hit.  ECB balance sheet is growing, yet gold is down.  I expect SPX priced in gold is getting relatively expensive. 

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  69. Acquired some SPY calls for the bounce up tomorrow.

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  70. Sell the rumour, buy the news, makes a lot of sense, considering bears controlled the tape today - an easy task at resistance. Methinks these animals do like cross-dressing.

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  71. My mind tells me that the banks are out for themselves with the funds they received from the ECB, and history tells me that they will serve their own intersts; however, even though today's auction was for short term bonds, the fact that they were able to pull it off leads me to believe that they may already have tomorrow rigged to work well (as you and Brian mentioned).  It may be possible that market movers may also want to bring the S&P back up to this mornings range and then let the market bring it back down in January when people will begin to see just how bad things really are.
    I sold some Jan VIX calls and Holding onto long Feb VIX calls.

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  72. Looks like SPX is on the way to close at LOD.
    Bulls rolling over? :)

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  73. I have a question for you more EW savvy types.  I'm mildly retarded with this up to this point, so bear with me.  On a daily chart, starting a couple days before November, is there any way for this to be an a-b-c-d-e symmetrical triangle with this last wave being an e wave overthrow?

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  74. William, I agree that the banks are out for themselves.  That is why I think that they will support the auction in order to hold up the value of all their sovereign junk bond holdings.  If the auction fails, the entire value of their holdings tanks.  It is a situation where they will chose the lesser of two evils, and the ECB already gave them the money to do it with.  We'll see...

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  75. Great call potus!  The Bulls held down that 1248 to 1250 range the last hour as the SPX closed at 1249.64.  Critical day tomorrow one way or the other.

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  76. ...or head down whenever "they" decide it is a convenient moment to downgrade the EU banks.

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  77. I wouldn't jump to any conclusions just yet.  I would not be surprised to see the obligatory "Italian bond yields sold at better than expected numbers" headline tomorrow, leading to a gap up opening.  Low volume weeks can lead to some whipsaw moves!

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  78. That is another good way of looking at it.  One reason why the acution might fail is if the banks need to use the ECB funds to meet their capital requirements.  If the banks now have enough funds to both meet their capital requirements and to purchase bonds, then the auction will do well.  If the banks do not have enough funds for both tasks, which might the banks do without?  Likely the actuion?

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  79. True.  My thought on this is: Would the ECB have lent out over 500B Euro to the banks without any strings attached to the upcoming Italian auction? Remember that the president of the ECB (Mario Draghi) is Italian. Hmmm.  What would you do in his shoes?

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  80. Eh - the short bond rate sold and rates come down to half and the market still sold off

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  81. I averaged my Short position on the SP500 Futures up to 1256 and they are looking pretty good right now. I reckon 1234 should be an easy target to reach from here. I'll probably cover some contracts there for a little profit...

    Covered SASOL on the JSE today  (-16% ROI) for my first losing trade since early September.  I suppose I got quite spoilt, so it still hurt a little.

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  82. Not enough people who are dumb enough to be buying above 1,260 apparently. 

    What I want to know is:  who were the suckers who were doing the buying from Thursday through Monday?  Ha, ha.

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  83. Yes, I thought about that too.  If I were Mario, I would want something in return.  Hopefully, Mario got more commitment from the banks than compared to Paulson did during the US financial crisis.  I am hoping that a successful sale of the longer term bonds would have more positive impact on the market.  I want to see tomorrow and Friday green before things turn mostly red 1st quarter of next year.

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  84. Who were the suckers from Thursday to Tuesday?  Possible answer: the same ones who expect to take the market higher into year end and loaded up today on everyone's fear of a failed Italian auction. (If that is their grand plan). 

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  85. I have the same view point as you do.

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  86. PM's leading the way boyz - Looking forward to the 1/2 price sale!

    Rinse - Lather - Repeat

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  87. 1,249 close today is no accident.  Means that everyone who bought since Thursday is now underwater.  Wall Street is not anyone's friend.  Even during the holidays.  Ha, ha.

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  88. Hmm... the move down looks impulsive.   

    I'm still short, from an average of roughly 1256 ES... now I have to decide what to do w/ it.

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  89. 'tis something I have considered many times.

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  90. Apparently oil fell hard today.  Down $2.  Explains Exxon and Chevron topping the WSJ SOS list yesterday. So oil is finally falling in line with the rising dollar, the euro and taking gold.  Next to follow should be the Dow, NDX and SPX. 

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  91. Bulls make money. Bears make money.

    Pigs get slaughtered! :)

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  92. As Dali said to Picasso: "Sell the nudes."

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  93. Dat dey do.  Especially around the holidays.  ;)

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  94. Nasdaq composite and Russell 2000 are overlapping their Dec 20 highs...
    Sloppy looking if this is a four with a five up still to come.  Possible b of C up?

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  95. However, a small push down would probably complete a i down, with a ii up right behind it depending on those bond sales at 0500 EST.

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  96. The thought occured to me last night that if *yesterday's* short term count was correct, then it's possible that yesterday was all of wave 5 of C.  Instead, I made the assumption that I had counted wrong, and that yesterday was still part of wave 3 of C. 

    If you look at yesterday's ST chart, though, you can see how yesterday's move up could have been it for the C wave.

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  97. A wave 3 question:

    According to EW doctrines, wave 3 does not have to be the longest, it just cannot be the shortest, right?

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  98. One other thing worth mentioning: this has all the confusion of a top.  On October 27, everyone was still looking for more upside that never came (and still hasn't, for that matter).  This has a similar "feel" now -- wave pattern is inconclusive, technical breakouts have occured (some whipsaws today, though), etc.

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  99. Nobody liked my XLE count?  I thought the October rally count was a pretty brilliant find, with the three Fib relationships of a and c.  I've been keeping that one under wraps for a while, because to me, it's a big "tell."  With more and more readers starting to get confused, I thought it was time to let that cat out of the bag.

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  100. Ty.

    Just curious, what's the psychology behind that?

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  101. While I cannot speak for everyone ....

    It's not that I'm not impressed. Honestly, I'm snowed under, and, don't particularly care. :)

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  102. I like your XLE count and it is brilliant but I am thinking that an 11 wave A is similar to 3 wave A, which indicates a flat ABC wave but it is not.  I am thinking a triangle or a diagonal.  What do you think?

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  103. I concur and the picture will be clearer tomorrow.

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  104. I thought it was pretty neat - just that I don't know enough about EW to understand the conclusion that "the October rally is virtually impossible to count as an impulse wave. Due to the numerous cases of overlap, it can only be counted as a corrective structure"

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  105. Low board comments are also indicative of a top - folks love to brag when they're right!

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  106. FYI, this information may be useful in preparing for market surprises.

    WSJ.com - Key Dates to Watch in Euro Crisis

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  107. I know this is premature....but I can already feel myself second guessing a move lower than S&P 985.
    I have an erie feeling that we just completed a B triangle and C takes us below 1000 before the next bull move.

    pretzel - hoping you've got some strong evidence you can pull out once we get closer to 1000 that proves this is not part of a ABC that started in May.

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  108. Basically, impulsive vs. corrective structures tell you about the trend at the next higher degree.  In other words, a corrective structure tells you that it is moving *counter* to the trend at one higher degree.  So if the October rally is corrective, it tells us that the larger trend is still down. 

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  109. regarding current market action...I like a top here simply for sentiment purposes.
    Bulls are calling for all time highs while a large percentage of bears are still calling for a 1300 capitulation move.
    If we just drop from here then even bears will have to chase lower giving this thing that much more ammo.

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  110. "Are you suffering from Premature Capitulation?  Talk to your broker about Bearoxx! 

    Warning: Bearoxx is not for everyone and may cause certain side effects, such as increased aggression, obnoxious ranting, EXCESSIVE USE OF CAPITALIZATION, and the tendency to refer to one's self in the third person."

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  111. That's actually one of the few hard "rules" of EWT.  It's not a guideline, in other words.  So that's a technical rule, as opposed to a psychological factor.

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  112. LOL!! And of course referencing PL's work as one's own!!

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  113. Regarding the possible triangle Ray and Rocky--

    My thoughts are this is necessary to have some level of ambiguity here.  Let's assume we get the move down to 1000 SPX -- well, the market's not going to allow it that everyone knows EXACTLY what to expect next.  So we'll have the ambiguity of "hmm, was that an abc with a b wave triangle, or wave 1 of Minor (3)?"  And I'll have to work my @ss off again to try and figure it out.  I think this "triangle" is the potential curveball I've been waiting for, to throw everyone off the 2008 fractal.

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  114. *Especially* since we're likely to see some sort of policy reponse at that level.

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  115. I likee the idea. My question is if this would require multiple MMs to coordinate their bots since firms may have independent strategies.

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  116. WHAT DOES A WORTHLESS PIECE OF LINEAR AMERIKAN GARBAGE LIKE YOU, KNOW ABOUT FELLOW SPANIARDS PABLO PICASSO Y SALVADOR DALI, TU IMBECIL AMERIKANO DE MIERDA?   OR KNOW ABOUT PIERRE RENOIR, OR HIS FILMMAKER SON, JEAN?  YOU ARE A FUCKING VILLAGE IDIOT, MAUI EW RETARD, YOU ARE SO LINEAR, YOU ARE PATHETIC.

    OH WAIT WAIT, SELL  S E L L ' THE NUDES' THAT'S THE MEANING OF EXISTENCE, S E L L, ON THIS TRASH PLANET, FILLED WITH 99% UTTER MENTAL RETARDS, GRASS EATERS ALL. 

    I PERSONALLY SAW ALL ORIGINAL PICASSO'S NUDE PENCIL SKETCHES, WHEN HE WAS IN HIS 80'S.  THEY WERE MOSTLY VAGINAL EXPRESSIONS.  AND EVEN THE LESSER ONE OF THEM, WAS BETTER THAN ALL THE ENTIRE STUPIDITY, THAT POURS OUT OF YOUR SHITHOLE AMERIKAN GARBAGE MOUTH, EVEN HIS LESSER SKETCH, IS MORE THAN YOUR ENTIRE WORTHLESS WORM LIFE.  YOU ARE UTTER SCUM.

    I CANNOT WAIT UNTIL AMERIKANS ARE WHOLLY WIPED OF THE EARTH, INFESTATION WILL END.

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  117. Call your Broker if you experience an Anger Outburst lasting more than 4 hours...

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  118. btw, anyone know if there's a drug that cures Humor-Impaired individuals?  

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  119. My Trin/volume indicator gave a strong sell signal today.

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  120. Great!  Good to hear that.

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  121. PL, I love your long-term views of the SPX and the USD. Was wondering what your quick thoughts were of this fractal?

    http://thegreatbearmarket-avbursch.blogspot.com/2011/12/waterfall-decline-ahead.html

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  122. I'm a bit confused as to why you have to ask -- when this is virtually identical to my long term count as published since early September?  Rob, do you even read these articles I write?  :D

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  123. What do I think of this fractal:

    http://pretzelcharts.blogspot.com/p/big-picture-long-term-elliott-wave.html

    Well, I like it!  ;)

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  124. You are quite right PL, the question I meant to ask was not that, since they are quite identical, but rather the validity of the fractal based on the fibonacci sequence highlighted? Does this play into EWT somehow?

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  125. Back in early October, when the rally off the October lows started, I wrote that my expectation for the Minor (2) peak was December -- so at that time, I anticipated a similar Fib sequence.  But the rally exceeded everyone's expectations considerably, and so it seemed fit to adapt to the reality of that.

    Elliott believed that price should always trump time, and I agree.  In other words, it doesn't factor into Elliott's original theory.  That said, a 3-month Minor (2) rally is actually more "fitting" than a one-month Minor (2) rally was -- but it's of little significance this late in the game, as my expectation that Minor (2) is topping isn't going to be influenced one way or another by anything other than price movement at this stage.

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  126. I am bearish as well.  I just don't know how high the pros want to take this market before crashing it.  They will fake everyone out several times before the final top is reached.  It starts down, you take a position, then it gaps up violently the next day.  I would think they want to end the year with the market in positive territory (since we are so close to that level).  This would bring additional capital in to stocks at the start of 2012 that they can short against.  Then, they would crash it as earnings get underway.  Seems like the most profitable path (for them). 

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  127. Gotcha, thanks for the explanation PL, price is always more important than time. An important lesson I try to keep in mind everyday, always live to trade another day!

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  128. Also, can't be b of C -- no such animal.  C waves are always 5 wave forms or an ending diagonal.

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  129. Looking over all the charts today, I think it's time for swing traders to get real bearish again.  If we haven't hit the exact top yet, we're almost certainly within a percent or two.

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  130. yes, I greatly suffered from premature capitulation in October, but then I discovered the RX.

    PretzelCharts!

    With daily doses I find myself with a greater understanding of market action. But I am concerned this new prescription may be addictive!

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  131. Does this mean that the slight tag on Tuesday is enough or do you think we need to fully enter that top zone yet?

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  132. I predict more donations coming your way soon!

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  133. Hopefully.  Been a 6-day dry spell.  Not even a Merry Christmas donation (although 1 promise of one coming soon).  :(

    But hey, combining all the new advertisers, I think the blog earned like $12 during that those 6 days. :D    :D    :D

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  134. Yes, those young people in China have it, you've heard of them right, youth in asia?

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  135. It could go either way, but the market's done it's minimum work.  Tops are friggin' hard to nail to the penny.  I think it's good enough for government work, and if I were a swing trader, I probably wouldn't be worrying about the pennies here.

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  136. Speaking of which, I read on wikipedia yesterday that 10% of mainland chinese live on US$1 (that's right, "one") per day. Man, that's rough.

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  137. How would what your looking at play into the short-and-hold crowd?

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  138. PL sounds a lot like a twenty something year old, video game playing, european college student. Don't you think?

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  139. Maybe they can send some o' them euthanAsians to Uruguay...

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  140. Thanks!  Except for the European part.  The rest of it sounds great though. 

    Any twenty-something, video game playing, college students want to trade places?

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  141. LOOK AT ME! LOOK AT ME NOW!  I TYPE IN ALL CAPS BECAUSE IT MAKES ME FEEL MORE IMPORTANT THAN YOU!  I SPEAK IN OBSCENITY LACED TIRADES TO DISTRACT YOU FROM HOW BORINGI AM!  I USE A LARGE FONT TO COMPENSATE FOR MY SMALL JOHNSON!  I AM RICH, BUT HAVEN'T EARNED ANY OF THE MONEY MYSELF, SO I CONSTANTLY HAVE TO ANNOUNCE MY IMAGINED SUPERIORITY TO ALL WHOM I MEET!  I AM A LEGEND IN MY OWN MIND!  NOW BE GONE, OR I SHALL BE FORCED TO TAUNT YOU SOME MORE!  PLEASE PAY ATTENTION TO ME!  BE GONE, WORTHLESS AND WEAK!  LOOK AT ME!  LOOK AT ME NOW!

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  142. "Now go away, or I shall be forced to taunt you a second time!"

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  143. sorry about the euro thing but you're in paradise so you don't count. Oh to be back in college, what fun!

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  144. Seems like the time to load up on some SPY puts is here!

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  145. I do hope when I'm 80 people still think I'm a 20-something college student.  I intend to stay young at heart as long as I possibly can.  

    Being overly-serious is for the immature; only those who have been defeated by their own inability to adapt are unable to laugh at themselves, humanity, and all the ironic tragedy that this life entails.

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  146. Either pick a stop loss or wait for a breakdown.  I can see at least one possibility that would stretch this the top out another week or two.  But the top looks a *whole* lot closer than the bottom here.

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  147. haha... I wonder who that is... :)

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  148. It isn't me, if that's what you're thinking.  It's enough work for me just to do the charts, answer all the questions, and just try to keep up with being me.  Also, if it were me, I'd have added in an "I, KNOWITALL, therefore FART in your GENERAL DIRECTION." 

    I happen to know who it is though.  You can actually tell because his prior posts have now changed to reflect his new name.  Same way I knew that the new GGecko was the old Vulture.   ;)

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  149. Rob, many thanks for the donation!  Merry Christmas and Happy New Year to you and your family as well.  :)

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  150. Well, catgone it!!!   Back to the books on that one...  Thanks prof logic.

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  151. I'd give almost anything for just ONE really clear chart on a major index.
     
    I'm pretty sure that most of the charts I'm looking at were drawn by vandals.

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  152. At the risk of "giving away the farm" here, I'm going to let you guys in on one of my little secrets.

    Sometimes when you're working straight through and you don't have time to prepare a real meal -- but you're starving, so you grab a Christmas-colored bag of Rolos and start eating those -- sometimes you just have to insist to yourself that this is REALLY the last one, and put the bag out of reach.  Okay, this is REALLY the last Rolo.  These things are evil.

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  153. Ah, you've discovered my technique for shorting the market, all the way up from 10800.  I hope you've got another 300 rolos.... On the up side, I'm hoping wave 3 will be a lot easier than wave 2. I really appreciate the advice, the charts and the humour.

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  154. Thanks.  :)

    Actually, I caught the majority of the October rally: 

    http://pretzelcharts.blogspot.com/2011/10/spx-update-multi-month-counter-trend.html

    And so far my call for the top at 1292 on October 28 has been good.  The challenge has been figuring out when the market's actually done screwing around with repeat trips back into these low-mid 1200 levels.

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  155. Oh I know you did. No criticism intended. I wish I had been here earlier. I'm learning fast though and look forward to my daily dose of Pretzels.

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  156. lol.   To your earlier point, I'm looking forward to wave 3 starting for real.   Third waves are "easy money" when you're on the right side.  Second waves are notorious b*tches, because there's always a lot of uncertainty about direction.  Second waves in bear markets are usually "the rally that fools the masses" so they're necessarily confusing and ambiguous.  Add that to the fact that they can retrace all the way up to 100% of wave 1, and it gets challenging at times trying to nail down a top. 

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  157. No excuses, I expect market top predictions down to the cent!

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  158. Fabio, thank you very much for the donation!  :)

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  159. So here's my hell tonight:  I'm done with the article.  A few minutes ago, literally as I was proof-reading and about to publish it... I catch something new, and potentially *very* revealing, in the charts.  So now I basically have to rewrite the whole thing, and re-draw 3 of the charts. 

    Being meticulous sucks sometimes.  :)

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  160. That *very* revealing info must make you even more bearish I'm guessing

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  161. Actually, no.  It would be a last head-trip for bears and get 'em shorting at the wrong time again.  I don't think anyone else has spotted it yet.  They will after my article comes out, though -- you'll start to see it crop up everywhere.  Maybe I should save it 'til the last minute, just for you guys.  :)

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  162. Okay, update's posted.  I think it should be added into R.N. Elliott's masterworks.  I have no idea how you guys convince me to work so friggin' hard for you.  :)   That one article represents 12 hours of work today... so no doubt, someone will stop by to insult me over it.  :D 

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  163. Good morning Pretz,guys and gals

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  164. No doubt! These are professional thieves at work... hiding their tracks.

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